(1)

The Economic Partnership, Political Coordination and Cooperation Agreement between the European Community and its Member States, of the one part, and the United Mexican States, of the other part (1) (the ‘Global Agreement’), was signed on 8 December 1997 and entered into force on 1 October 2000.

(2)

In accordance with Article 6(2) of the Act of Accession of the Republic of Croatia, the accession of Croatia to the Global Agreement is to be agreed by means of a protocol to the Global Agreement concluded between the Council, acting unanimously on behalf of the Member States, and the United Mexican States.

(3)

On 14 September 2012, the Council authorised the Commission to open negotiations with the United Mexican States with a view to concluding the Third Additional Protocol to the Global Agreement to take account of the accession of the Republic of Croatia to the European Union (the ‘Protocol’). The negotiations were successfully concluded.

(4)

Article 5(3) of the Protocol provides for its provisional application before its entry into force.

(5)

The Protocol should be signed and applied on a provisional basis, pending the completion of the procedures necessary for its entry into force,

(1)

Article 43(3) of the Treaty provides that the Council, on a proposal from the Commission, is to adopt measures on the fixing and allocation of fishing opportunities.

(2)

Regulation (EU) No 1380/2013 of the European Parliament and of the Council (1) requires that conservation measures be adopted taking into account available scientific, technical and economic advice, including, where relevant, reports drawn up by the Scientific, Technical and Economic Committee for Fisheries (STECF).

(3)

It is incumbent upon the Council to adopt measures on the fixing and allocation of fishing opportunities, including certain conditions functionally linked thereto, as appropriate. Fishing opportunities should be distributed among Member States in such a way as to assure each Member State relative stability of fishing activities for each stock or fishery and having due regard to the objectives of the common fisheries policy (CFP) established by Regulation (EU) No 1380/2013.

(4)

The total allowable catches (‘TACs’) should be established on the basis of available scientific advice, taking into account biological and socioeconomic aspects whilst ensuring fair treatment between fishing sectors, as well as in the light of the opinions expressed during the consultation of stakeholders, and in particular the advisory councils concerned.

(5)

Where a TAC relating to a stock is allocated to one Member State only, it is appropriate to empower that Member State in accordance with Article 2(1) of the Treaty to determine the level of such TAC. Provisions should be made to ensure that, when fixing that TAC level, the Member State concerned acts in a manner fully consistent with the principles and rules of the CFP.

(6)

Council Regulation (EC) No 847/96 (2) introduced additional conditions for year-to-year management of TACs, including, under Articles 3 and 4 of that Regulation, flexibility provisions for precautionary and analytical TACs. Under Article 2 of that Regulation, when fixing the TACs, the Council is to decide to which stocks Article 3 or 4 of that Regulation is not to apply, in particular on the basis of the biological status of the stocks. More recently, a further year-to-year flexibility mechanism was introduced by Article 15(9) of Regulation (EU) No 1380/2013 for all stocks that are subject to the landing obligation. Therefore, in order to avoid excessive flexibility that would undermine the principle of rational and responsible exploitation of marine biological resources, hinder the achievement of the objectives of the CFP and result in the deterioration of the biological status of the stocks, it should be established that Articles 3 and 4 of Regulation (EC) No 847/96 apply to analytical TACs only where the year-to-year flexibility provided for in Article 15(9) of Regulation (EU) No 1380/2013 is not used.

(7)

The landing obligation referred to in Article 15 of Regulation (EU) No 1380/2013 is introduced on a fishery-by-fishery basis. In the regions covered by this Regulation, all species subject to catch limits should be landed as of 1 January 2019. Article 16(2) of Regulation (EU) No 1380/2013 provides that, when the landing obligation in respect of a fish stock is introduced, fishing opportunities are to be fixed taking into account the change from fixing fishing opportunities that reflect landings to fixing fishing opportunities that reflect catches. However, specific exemptions from the landing obligation are granted in accordance with Article 15(4) to (7) of that Regulation. On the basis of the joint recommendations submitted by the Member States and in accordance with Article 15 of that Regulation, the Commission adopted a number of delegated regulations laying down specific discard plans applicable for an initial period of no more than three years, renewable for a further total period of three years, implementing the landing obligation.

(8)

Fishing opportunities should be in accordance with international agreements and principles, such as the 1995 United Nations agreement concerning the conservation and management of straddling stocks and highly migratory fish stocks (3), and the detailed management principles laid down in the 2008 International Guidelines for the Management of Deep-sea Fisheries in the High Seas of the Food and Agriculture Organisation of the United Nations, according to which, in particular, a regulator should be more cautious when information is uncertain, unreliable or inadequate. The absence of adequate scientific information should not be used as a reason for postponing or failing to take conservation and management measures.

(9)

The TAC and the Union quota for black scabbardfish in Union and international waters of 5, 6, 7 and 12 should be set taking into account that there are third-country catches from that stock and that the Union should have fishing opportunities corresponding to the share of historic catches from that stock.

(10)

In view of the International Council for the Exploration of the Sea (ICES) advice concerning a decrease in fishing opportunities, given a high quota uptake and in the light of the introduction of the full landing obligation in 2019, directed fisheries should not be allowed for alfonsinos in subareas 3 to 10, 12 and 14 (North Sea, North- and South-Western waters) and the TAC should be set for bycatches only.

(11)

According to the advice provided by ICES, limited on-board observations show that the percentage of roughhead grenadier has been less than 1 % of the reported catches of roundnose grenadier. On the basis of those considerations, ICES advises that there should be no directed fisheries for roughhead grenadier and that bycatches should be counted against the TAC for roundnose grenadier in order to minimise the potential for species misreporting. ICES indicates that there are considerable differences, of more than one order of magnitude (more than ten times), between the relative proportions of roundnose and roughhead grenadier reported in the official landings and the observed catches and scientific surveys in the areas where the fishery for roughhead grenadier currently occurs. There is very limited data available for this species, and some of the reported landing data are considered by ICES to be species misreporting. As a consequence, it is not possible to establish an accurate historical record of catches of roughhead grenadier. Therefore, any bycatches for roughhead grenadier should be limited to 1 % of each Member State's quota of roundnose grenadier and counted against that quota, in line with the scientific advice. If roughhead grenadier is considered a bycatch only to roundnose grenadier and belongs to the same TAC there will no longer be any misreporting.

(12)

In view of the ICES advice, it is appropriate that the TAC for red seabream in ICES subareas 6, 7 and 8 (North-Western waters) be kept as a bycatch-only TAC.

(13)

Catches of red seabream are taken from the relevant Fishery Committee for the Eastern Central Atlantic (CECAF) and General Fisheries Commission for the Mediterranean (GFCM) areas, which border on ICES subarea 9. Given that ICES data for those adjacent areas are incomplete, the scope of the TAC should remain limited to ICES subarea 9. Nevertheless, with a view to ensuring that management decisions are made on the best available basis, provisions have been made for data reporting for those adjacent areas.

(14)

For red seabream in ICES subarea 10, no ICES advice has been provided for 2020. However, fishing opportunities should be set for both 2019 and 2020. It is possible that an appropriate amendment to the fishing opportunities established by this Regulation will be needed when the scientific advice is issued for 2020.

(15)

In view of the low uptake and the fact that no targeted fishing is taking place, the TAC for black scabbardfish in ICES subareas 1 to 4 (North Sea and Skagerrak) should no longer be set.

(16)

The TACs for roundnose grenadier in ICES subareas 1, 2 and 4 (North Sea) and greater forkbeard in ICES subareas 1 to 10, 12 and 14 should no longer be set. The ICES advice establishes that the absence of TACs would result in no or a low risk of unsustainable exploitation.

(17)

ICES advises that there should be no catches of orange roughy until 2020. It is appropriate for the fishing, retaining on board, transhipping and landing of that species to be prohibited, as the stock is depleted and is not recovering. ICES notes that there have been no directed Union fisheries for orange roughy in the North-East Atlantic since 2010.

(18)

ICES advises that the fishing mortality of deep-sea sharks should be minimised and no targeted fishing should be permitted. The deep-sea sharks are long-lived species with low reproductive rates and have quickly become overexploited. Fishing opportunities for such species should therefore be fully restricted through a general prohibition on fishing those species. However, directed artisanal deep-sea fisheries for black scabbardfish that use longlines have unavoidable bycatches of deep-sea sharks, which are currently discarded dead. Longlines are recognised as a selective fishing gear in such fisheries. Even with this gear, however, accidental bycatches of deep-sea sharks have proved to be unavoidable. Therefore, a restrictive TAC for unavoidable bycatches of those species in directed fisheries for black scabbardfish that use longlines should be maintained. The Member States concerned should further develop regional management measures for the fishing of black scabbardfish with a view to reducing bycatches of deep-sea sharks. In addition, they should establish specific data-collection measures for deep-sea sharks in order to ensure that those stocks are closely monitored. Fixing a Union bycatch allowance for deep-sea sharks in Union and international waters of ICES subareas 5 to 9, in Union and international waters of ICES subarea 10 and in Union waters of CECAF 34.1.1, 34.1.2 and 34.2 is without prejudice to the principle of relative stability as regards deep-sea sharks in those areas.

(19)

In order to avoid the interruption of fishing activities and to ensure the livelihood of the fishermen of the Union, this Regulation should apply from 1 January 2019. In order to allow the Member States to ensure a timely application of this Regulation, it should enter into force immediately after its publication,

(a)

have been taken by vessels flying the flag of a Member State having a quota and that quota has not been exhausted; or

(b)

consist of a share in a Union quota which has not been allocated by quota among Member States, and that Union quota has not been exhausted.

(1)

An eco-management and audit scheme (EMAS) has been established under Regulation (EC) No 1221/2009. The objective of EMAS is to promote continuous improvements in the environmental performance of organisations by the establishment and implementation of environmental management systems by organisations, evaluation of the performance of such systems, provision of information on environmental performance, an open dialogue with the public and other interested parties and the active involvement of employees. To achieve this objective, Annexes I to IV to that Regulation set out specific requirements to be observed by those organisations wishing to participate in EMAS and obtain EMAS registration.

(2)

Annex IV to Regulation (EC) No 1221/2009 sets out the requirements on environmental reporting. That Annex should be amended to address improvements identified in the light of experience gained in the operation of EMAS. Given the number and nature of these amendments, it is appropriate to replace Annex IV in its entirety in the interests of clarity.

(3)

Regulation (EC) No 1221/2009 should therefore be amended accordingly.

(4)

Organisations registered under EMAS are required either to prepare or update an environmental statement in accordance with Annex IV to Regulation (EC) No 1221/2009 on a yearly basis. Except in the case of small organisations exempted under Article 7 of that Regulation, the environmental statement or updated environmental statement has to be validated by an accredited or licensed environmental verifier as part of the verification of that organisation in accordance with Article 18 of that Regulation. Organisations preparing for registration under EMAS are also required to submit a validated environmental statement as part of their application for registration. A transitional period is therefore needed to provide organisations with sufficient time to address the transition to the changes made by this Regulation.

(5)

The measures provided for in this Regulation are in accordance with the opinion of the Committee established by Article 49 of Regulation (EC) No 1221/2009,

(1)

The Chicago Convention on International Civil Aviation (‘the Convention’), which aims to regulate international air transport, entered into force on 4 April 1947. It established the International Civil Aviation Organization (ICAO).

(2)

The Member States of the Union are contracting States to the Convention and members of the ICAO, whereas the Union has observer status in certain ICAO bodies.

(3)

Pursuant to Article 54 of the Convention, the ICAO Council is to adopt international standards and recommended practices.

(4)

The 21st Conference of the Parties to the United Nations Framework Convention on Climate Change was successfully concluded in December 2015 with the adoption of the Paris Agreement. The objective of the Paris Agreement is to limit the increase in global average temperature to well below 2 °C above pre-industrial levels, and to pursue efforts to limit the temperature increase to 1,5 °C above those levels. All sectors of the economy should contribute to achieving these emission reductions, including international aviation.

(5)

In 2016 the 39th ICAO General Assembly decided, by means of Resolution A39-3, to develop a global market-based mechanism to limit greenhouse gas emissions from international aviation at their 2020 levels. The Union position in that regard was established by Council Decision (EU) 2016/915 (1).

(6)

On 27 June 2018, at the 10th meeting of its 214th session, the ICAO Council adopted the First Edition of Volume IV of Annex 16 to the Convention: the International Standards and Recommended Practices on Environmental Protection – Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).

(7)

The rules contained in CORSIA are liable to become binding in accordance with, and within the limits set out in, the Convention. They are also liable to become binding upon the Union and its Member States under existing international air transport agreements.

(8)

In accordance with Article 90 of the Convention, unless a majority of the contracting States register their disapproval, CORSIA will become effective three months after the deadline for registering disapproval.

(9)

Article 38 of the Convention covers departures from international standards and procedures. In accordance with that Article, any contracting State which finds it impracticable to comply in all respects with any such international standard or procedure, or to bring its own regulations or practices into full accord with any international standard or procedure after amendment of the latter, or which deems it necessary to adopt regulations or practices differing in any particular respect from those established by an international standard, needs to give immediate notification to the ICAO of the differences between its own practice and that established by the international standard.

(10)

On 20 July 2018 the ICAO sent out State Letter AN 1/17.14 – 18/78 (‘the State Letter’), requesting the contracting States to, first, notify any disapproval of any part of CORSIA before 22 October 2018 and, second, notify any differences between their national practices and CORSIA and the expected date for compliance before 1 December 2018.

(11)

CORSIA is to become applicable to an aeroplane operator producing annual CO2 emissions greater than 10 000 tonnes from international flights conducted by aeroplanes with a maximum certificated take-off mass greater than 5 700 kg, with the exception of humanitarian, medical and firefighting flights.

(12)

Monitoring, reporting and verification (‘MRV’) requirements set out in CORSIA are to become applicable as from 1 January 2019.

(13)

From 1 January 2021 to 31 December 2035, the offsetting requirements of CORSIA are to become applicable to an aeroplane operator conducting international flights (as defined in point 1.1.2 of Chapter 1 of Part II and point 2.1 of Chapter 2 of Part II) between contracting States referred to in the forthcoming ICAO document entitled ‘CORSIA States for Chapter 3 State Pairs’.

(14)

It is appropriate to establish the position to be taken on the Union's behalf in reply to the State Letter. This is because CORSIA will be capable of decisively influencing the content of Union law, in particular Directive 2003/87/EC of the European Parliament and of the Council (2).

(15)

Given that CORSIA would allow significant progress to be achieved at international level, no disapproval should be notified under Article 90 of the Convention.

(16)

The Union fully supports the efforts undertaken within the ICAO to make CORSIA operational as soon as possible. In accordance with Directive 2003/87/EC, the Commission is in the process of translating the CORSIA MRV requirements into Union acts with expected entry into force by January 2019. Moreover, the Commission is to present to the European Parliament and to the Council a report which considers ways for those instruments to be implemented in Union law. The time limit within which possible differences have to be notified according to the State Letter is too short for any adaptations to CORSIA to be adopted by the Union within that limit. Therefore, in order for the ICAO to take full account of the current legal situation at Union level as well as work initiated in the area of MRV, Member States should, in reply to the State Letter, notify differences in accordance with the addendum to this Decision.

(17)

Article 28b(2) and (3) of Directive 2003/87/EC covers the follow-up to be carried out with regard to the outcome of work at ICAO level. It is appropriate to inform the ICAO about the terms of those provisions.

(18)

The Union's position is to be expressed by the Member States of the Union that are members of the ICAO,

(1)

On 22 June 2018, the Council decided in accordance with Article 121(4) of the Treaty on the Functioning of the European Union (‘TFEU’) that a significant observed deviation from the adjustment path toward the medium-term budgetary objective of – 1,5 % of GDP existed in Hungary.

(2)

In view of the established significant deviation, the Council on 22 June 2018 issued a Recommendation (2) for Hungary to take the necessary measures to ensure that the nominal growth rate of net primary government expenditure (3) does not exceed 2,8 % in 2018, corresponding to an annual structural adjustment of 1,0 % of GDP. It recommended that Hungary use any windfall gains for deficit reduction, while budgetary consolidation measures should ensure a lasting improvement in the general government structural balance in a growth-friendly manner. The Council established a deadline of 15 October 2018 for Hungary to report on the action taken in response to that Recommendation.

(3)

On 18 and 19 September 2018, the Commission undertook an enhanced surveillance mission in Hungary for the purpose of on-site monitoring under Article 11(2) of Regulation (EC) No 1466/97. After having transmitted its provisional findings to the Hungarian authorities for comments, the Commission reported its findings to the Council on 21 November 2018. Those findings were subsequently made public. The Commission report finds that the Hungarian authorities intend to maintain the 2018 headline deficit target of 2,4 % of GDP as set in the 2018 Convergence Programme and thus do not plan to act upon the Council Recommendation of 22 June 2018.

(4)

On 15 October 2018, the Hungarian authorities submitted a report on action taken in response to the Council Recommendation of 22 June 2018 (4). In the report, the authorities reiterated that their target for 2018 remains a headline deficit of 2,4 % of GDP. Compared to the budgetary projection in the 2018 Convergence Programme, the authorities expect significantly higher tax revenues and savings due to decreased co-financing costs of projects funded from the Union budget. However, they plan additional expenditure that fully offsets the deficit-reducing effect of those developments. The reported new discretionary measures have no significant net fiscal impact on the budget outcome in 2018, thus falling short of the requirement stated in the Council Recommendation of 22 June 2018.

(5)

In 2018, based on the Commission 2018 autumn forecast, the growth of government expenditure, net of discretionary revenue measures and one-offs, is projected at 7,0 %, well above the recommended reference rate of growth of 2,8 % (deviation of 1,6 % of GDP). The structural balance is set to deteriorate by 0,4 % of GDP against the recommended improvement of 1,0 % of GDP (deviation of 1,4 % of GDP). Therefore, both pillars point to a deviation from the recommended adjustment by a wide margin. The reading of the expenditure benchmark is negatively affected by three elements, namely a lower-than-currently-estimated medium-term potential growth rate and GDP deflator underlying the expenditure benchmark as well as an indirect revenue effect of certain measures. After adjusting for these factors, the expenditure benchmark appears to adequately reflect the fiscal effort and still points to a deviation. The assessment of the structural balance leads to a similar result. The structural balance is negatively impacted by a revenue shortfall, but it is partly offset by the effect of a higher point estimate for potential GDP growth compared to the medium-term average underlying the expenditure benchmark. Therefore the overall assessment confirms a deviation from the recommended adjustment by a wide margin.

(6)

The above findings lead to the conclusion that Hungary's response to the Council Recommendation of 22 June 2018 has been insufficient. The fiscal effort falls short of ensuring that the nominal growth rate of net primary government expenditure does not exceed 2,8 % in 2018, which would correspond to an annual structural adjustment of 1,0 % of GDP,

(1)

The release for free circulation in the Union of imported controlled substances is subject to quantitative limits.

(2)

The Commission is required to determine those limits and allocate quotas to undertakings.

(3)

Furthermore, the Commission is required to determine the quantities of controlled substances other than hydrochlorofluorocarbons that may be used for essential laboratory and analytical uses, and the undertakings that may use them.

(4)

The determination of the allocated quotas for essential laboratory and analytical uses has to ensure that the quantitative limits set out in Article 10(6) of Regulation (EC) No 1005/2009 are respected, applying Commission Regulation (EU) No 537/2011 (2). As those quantitative limits include quantities of hydrochlorofluorocarbons licensed for laboratory and analytical uses, the production and import of hydrochlorofluorocarbons for those uses should also be covered by that allocation.

(5)

The Commission has published a notice to undertakings intending to import or export controlled substances that deplete the ozone layer to or from the European Union in 2019 and to undertakings intending to produce or import these substances for laboratory and analytical uses in 2019 (3), and has thereby received declarations on intended imports in 2019.

(6)

The quantitative limits and quotas should be determined for the period 1 January to 31 December 2019, in line with the annual reporting cycle under the Montreal Protocol on Substances that Deplete the Ozone Layer.

(7)

The measures provided for in this Decision are in accordance with the opinion of the Committee established by Article 25(1) of Regulation (EC) No 1005/2009,

(1)

On 29 March 2017, the United Kingdom of Great Britain and Northern Ireland (the ‘United Kingdom’) submitted the notification of its intention to withdraw from the Union pursuant to Article 50 of the Treaty on European Union. The Treaties will cease to apply to the United Kingdom from the date of entry into force of a withdrawal agreement or failing that, two years after that notification, i.e. from 30 March 2019, unless the European Council, in agreement with the United Kingdom, unanimously decides to extend that period.

(2)

As announced in the Commission Communication of 13 November 2018‘Preparing for the withdrawal of the United Kingdom from the European Union on 30 March 2019: a Contingency Action Plan’ (2) (‘the Contingency Action Plan’), a withdrawal without an agreement may pose risks in relation to certain services provided to Union operators by central securities depositories (‘CSDs’) that have already been authorised in the United Kingdom (‘UK CSDs’) and that cannot be replaced in the short-term. To prevent such risks, it is justified and in the interests of the Union and its Member States to ensure, for a limited period of time, that UK CSDs may continue to provide services in the Union after 29 March 2019.

(3)

CSDs are instrumental to financial markets. The recording of securities in a book-entry system (‘notary services’) and the maintenance of securities accounts at the top tier level (‘central maintenance services’) increase transparency and protect investors, as they ensure the integrity of the issue and prevent undue duplication or reduction of securities. CSDs also operate securities settlement systems, which ensure that securities transactions are settled properly and in a timely manner. These functions are critical in the post-trade clearing and settlement process and as such essential to the financial stability of the Union and its Member States. Securities settlement systems are essential also to monetary policy as they are closely involved in securing collateral for monetary policy operations. Furthermore, market operators in Ireland rely on the services of a UK CSD with respect to corporate securities and exchange traded funds constituted under the domestic law of Ireland.

(4)

From 30 March 2019, UK CSDs will be ‘third-country CSDs’ and, as such, may only provide notary and central maintenance services in relation to financial instruments constituted under the law of a Member State if they are recognised by the European Securities and Markets Authority (‘ESMA’) in accordance with Article 25 of Regulation (EU) No 909/2014. In the absence of the recognition of UK CSDs, Union issuers may not use UK CSDs to record transferable securities constituted under such laws in book-entry form in a CSD as required by Article 3 of Regulation (EU) No 909/2014. That situation may result in temporary challenges for issuers to fulfil their legal obligations. As announced in the Contingency Action Plan, it is therefore necessary that, in that exceptional situation, the legal and supervisory arrangements governing UK CSDs are determined as equivalent for a strictly limited period of time and under specific conditions so that those CSDs may continue to provide notary and maintenance services in the Union.

(5)

In accordance with Article 25(9) of Regulation (EU) No 909/2014, three conditions must be fulfilled in order to determine that the legal and supervisory arrangements of a third country regarding CSDs authorised therein are equivalent to those laid down in that Regulation.

(6)

First, the legal and supervisory arrangements of a third country must ensure that CSDs in that third country comply with legally binding requirements which are in effect equivalent to the requirements laid down in Regulation (EU) No 909/2014. Until 29 March 2019, UK CSDs must comply with the requirements laid down in Regulation (EU) No 909/2014. As part of the European Union (Withdrawal) Act 2018, the United Kingdom incorporated on 26 June 2018 the provisions of Regulation (EU) No 909/2014 into United Kingdom domestic law with effect from the date of the United Kingdom's withdrawal from the Union.

(7)

Second, the legal and supervisory arrangements of the third country must ensure that CSDs established in the third country are subject to effective supervision, oversight and enforcement on an ongoing basis. Until 29 March 2019, UK CSDs are under the supervision by the Bank of England, as determined by United Kingdom domestic law in accordance with Regulation (EU) No 909/2014. As part of the incorporation of Regulation (EU) No 909/2014 into United Kingdom domestic law, the Bank of England remains responsible for the supervision of CSDs and its supervisory, oversight and enforcement powers regarding CSDs will remain essentially unchanged.

(8)

Third, the legal framework of the third country must provide for an effective equivalent system for the recognition of CSDs authorised under third-country legal regimes. This is ensured by the incorporation of the equivalence system in Article 25 of Regulation (EU) No 909/2014 into United Kingdom domestic law.

(9)

The Commission concludes that the legal and supervisory arrangements of the United Kingdom applicable to UK CSDs on the day after its withdrawal from the Union meet the conditions laid down in Article 25(9) of Regulation (EU) No 909/2014.

(10)

However, this Decision is based on the legal and supervisory arrangements applicable to UK CSDs on the day after the withdrawal of the United Kingdom from the Union. Those legal and supervisory arrangements should only be considered equivalent where the requirements applicable to CSDs in United Kingdom domestic law are maintained and continue to be effectively applied and enforced on an ongoing basis. The effective exchange of information and coordination of supervisory activities between ESMA and the Bank of England is therefore an essential condition for maintaining the determination of equivalence.

(11)

That exchange of information requires the conclusion of comprehensive and effective cooperation arrangements in accordance with Article 25(10) of Regulation (EU) No 909/2014. Those cooperation arrangements should also ensure the possibility to share all relevant information with the authorities referred to in Article 25(5) of Regulation (EU) No 909/2014, including the European Central Bank and the other members of the European System of Central Banks, for the purpose of consulting those authorities about the recognised status of UK CSDs or where that information is necessary for those authorities to carry out their supervisory tasks.

(12)

In the event of the exceptional situation of the withdrawal of the United Kingdom from the Union without an agreement, and given the importance of UK CSDs to market operators in the Union, cooperation arrangements established pursuant to Article 25(10) of Regulation (EU) No 909/2014 must ensure that ESMA has immediate access, on an ongoing basis, to all information requested by it. That information includes but is not limited to information allowing for the assessment of any material risks posed by UK CSDs to the Union or its Member States, either directly or indirectly. The cooperation arrangements should therefore specify the mechanism for the exchange of information between ESMA, the competent authorities of the Member States in which a CSD has a branch or provides CSD services (the ‘host Member State’) and the Bank of England, including access to all information regarding UK CSDs that is requested by ESMA and in particular access to information requested by the competent authority in the host Member State in the cases referred to in Article 25(7) of Regulation (EU) No 909/2014 regarding the periodic reporting on UK CSDs' activities in the host Member State; the communication of the identity of the issuers and participants in the securities settlement system operated by UK CSDs or any other relevant information concerning UK CSDs' activities in the host Member State; as well as the prompt notification of ESMA of any developments with regard to UK CSDs that could affect the monetary policy in the Union and of any changes in the legal and or supervisory arrangements applicable to UK CSDs; the mechanism for prompt notification of ESMA where the Bank of England deems a CSD that it is supervising to infringe the conditions of its authorisation or of other applicable law; and the procedures concerning the coordination of supervisory activities including, where appropriate, on-site inspections.

(13)

The Commission, in cooperation with ESMA, will monitor any changes introduced in the legal and supervisory arrangements affecting UK CSDs, market developments as well as the effectiveness of supervisory cooperation, including prompt information exchange between ESMA and the Bank of England. The Commission might undertake a review at any time, where relevant developments make it necessary for the Commission to re-assess the equivalence granted by this Decision, including where the terms of the cooperation arrangements concluded between ESMA and the Bank of England are not respected or do not allow for an effective assessment of the risk that UK CSDs pose to the Union or its Member States.

(14)

In light of the uncertainties surrounding the future relationship between the United Kingdom and the Union, as well as their potential impact on the financial stability of the Union and its Member States and on the integrity of the Single Market, this Decision should expire on 30 March 2021. The assessment contained in this Decision is therefore without prejudice to any future assessment of the legal and supervisory arrangements of the United Kingdom for CSDs and, as such, should not be relied upon beyond the purposes of this Decision.

(15)

This Decision should enter into force as a matter of urgency and should only apply from the day following that on which the Treaties cease to apply to and in the United Kingdom unless a withdrawal agreement concluded with the United Kingdom has entered into force by that date or the two-year period referred to in Article 50(3) of the Treaty on European Union has been extended.

(16)

The measures provided for in this Decision are in accordance with the opinion of the European Securities Committee,

(a)

a withdrawal agreement concluded with the United Kingdom of Great Britain and Northern Ireland in accordance with Article 50(2) of the Treaty on European Union has entered into force by that date;

(b)

a decision has been taken to extend the two year period referred to in Article 50(3) of the Treaty on European Union.

(1)

On 29 March 2017, the United Kingdom of Great Britain and Northern Ireland (the ‘United Kingdom’) submitted the notification of its intention to withdraw from the Union pursuant to Article 50 of the Treaty on European Union. The Treaties will cease to apply to the United Kingdom from the date of entry into force of a withdrawal agreement or failing that, two years after that notification, i.e. from 30 March 2019, unless the European Council, in agreement with the United Kingdom, unanimously decides to extend that period.

(2)

As announced in the Commission Communication of 13 November 2018‘Preparing for the withdrawal of the United Kingdom from the European Union on 30 March 2019: a Contingency Action Plan’ (2) (‘the Contingency Action Plan’), a withdrawal without an agreement may pose risks to the financial stability of the Union and its Member States. To prevent such risks, it is justified and in the interests of the Union and its Member States to ensure, for a limited period of time, that central counterparties (‘CCPs’) that have already been authorised in the United Kingdom (‘UK CCPs’) may continue to provide clearing services in the Union after 29 March 2019.

(3)

Central clearing increases market transparency, mitigates credit risks and reduces the risks of contagion in the event of the default of one or more participants in a CCP. The provision of such services is therefore critical for ensuring financial stability. A disruption in the provision of clearing services could also affect the implementation of central banks' monetary policy where transactions are cleared in the currency issued by a Union central bank. Moreover, financial instruments cleared by CCPs are also essential for financial intermediaries and their clients, e.g. to hedge interest rate risks, and a disruption in the provision of clearing services could therefore also create risks for the real economy of the Union.

(4)

As of 31 December 2017, the outstanding notional amount of OTC derivatives is more than EUR 500 trillion worldwide, of which interest rate derivatives represent more than 75 % and foreign exchange derivatives almost 20 %. About 30 % of all OTC derivatives are denominated in euro and other Union currencies. The market for central clearing of OTC derivatives is highly concentrated, in particular the market for central clearing of OTC interest rate derivatives of which about 97 % are cleared in one UK CCP (3).

(5)

From 30 March 2019, UK CCPs will be ‘third-country CCPs’ and, as such, may only provide clearing services if they are recognised by the European Securities and Markets Authority (‘ESMA’) in accordance with Article 25 of Regulation (EU) No 648/2012. In the absence of the recognition of UK CCPs, counterparties established in the Union may not clear OTC derivatives that are subject to the clearing obligation pursuant to Article 4 of Regulation (EU) No 648/2012 in UK CCPs. That situation may result in temporary challenges for those counterparties to fulfil their clearing obligations, which in turn, may pose risks to the financial stability and the implementation of the monetary policy of the Union and its Member States. As announced in the Contingency Action Plan, it is therefore necessary that, in that exceptional situation, the legal and supervisory arrangements governing UK CCPs are determined as equivalent for a strictly limited period of time and under specific conditions so that those CCPs may continue to provide clearing services in the Union.

(6)

In accordance with Article 25(6) of Regulation (EU) No 648/2012, three conditions must be fulfilled in order to determine that the legal and supervisory arrangements of a third country regarding CCPs authorised therein are equivalent to those laid down in that Regulation.

(7)

First, the legal and supervisory arrangements of a third country must ensure that CCPs in that third country comply with legally binding requirements which are equivalent to the requirements laid down in Title IV of Regulation (EU) No 648/2012. Until 29 March 2019, Regulation (EU) No 648/2012 is directly applicable in the United Kingdom and UK CCPs authorised under Article 14 of that Regulation therefore must comply with its requirements. As part of the European Union (Withdrawal) Act 2018, the United Kingdom incorporated on 26 June 2018 the provisions of Regulation (EU) No 648/2012 into United Kingdom domestic law with effect from the date of the United Kingdom's withdrawal from the Union.

(8)

Second, the legal and supervisory arrangements of the third country must ensure that CCPs established in the third country are subject to effective supervision and enforcement on an ongoing basis. Until 29 March 2019, UK CCPs are under the supervision of the Bank of England, as determined by United Kingdom domestic law in accordance with Regulation (EU) No 648/2012 (4). As part of the incorporation of Regulation (EU) No 648/2012 into United Kingdom domestic law, the Bank of England remains responsible for the supervision of CCPs and its supervisory and enforcement powers regarding CCPs will remain essentially unchanged.

(9)

Third, the legal framework of the third country must provide for an effective equivalent system for the recognition of CCPs authorised under third-country legal regimes. This is ensured by the incorporation of the equivalence system in Article 25 of Regulation (EU) No 648/2012 into United Kingdom domestic law.

(10)

The Commission concludes that the legal and supervisory arrangements of the United Kingdom applicable to UK CCPs on the day after its withdrawal from the Union meet the conditions laid down in Article 25(6) of Regulation (EU) No 648/2012.

(11)

However, this Decision is based on the legal and supervisory arrangements applicable to UK CCPs on the day after the withdrawal of the United Kingdom from the Union. Those legal and supervisory arrangements should only be considered equivalent where the requirements applicable to CCPs in United Kingdom domestic law are maintained and continue to be effectively applied and enforced on an ongoing basis. The effective exchange of information and coordination of supervisory activities between ESMA and the Bank of England is therefore an essential condition for maintaining the determination of equivalence.

(12)

That exchange of information requires the conclusion of comprehensive and effective cooperation arrangements in accordance with Article 25(7) of Regulation (EU) No 648/2012. Those cooperation arrangements should also ensure the possibility to share all relevant information with the authorities referred to in Article 25(3) of Regulation (EU) No 648/2012, including the European Central Bank and the other members of the European System of Central Banks, for the purpose of consulting those authorities about the recognised status of UK CCPs or where that information is necessary for those authorities to carry out their supervisory tasks.

(13)

In the event of the exceptional situation of the withdrawal of the United Kingdom from the Union without an agreement, cooperation arrangements established pursuant to Article 25(7) of Regulation (EU) No 648/2012 must ensure that ESMA has immediate access, on an ongoing basis, to all information requested by it. That information includes but is not limited to information allowing for the assessment of any material risks posed by UK CCPs to the Union or its Member States, either directly or indirectly. The cooperation arrangements should therefore specify the mechanisms and procedures for the prompt exchange of information related to the clearing activities of UK CCPs with respect to financial instruments denominated in Union currencies, trading venues, clearing participants as well as subsidiaries of Union credit institutions and investment firms; to interoperability arrangements with other CCPs; to own resources; to default funds composition and calibration, to margins, liquid resources and collateral portfolios including haircut calibrations and to stress tests; the prompt notification of any change affecting UK CCPs or the United Kingdom legal and supervisory arrangements applicable to UK CCPs; as well as the mechanism for the prompt notification of ESMA of any developments with regard to UK CCPs that could affect the monetary policy in the Union.

(14)

The Commission, in cooperation with ESMA, will monitor any changes introduced in the legal and supervisory arrangements affecting UK CCPs, market developments as well as the effectiveness of supervisory cooperation, including prompt information exchange between ESMA and the Bank of England. The Commission might undertake a review at any time where relevant developments make it necessary for the Commission to re-assess the equivalence granted by this Decision, including where the terms of the cooperation arrangements concluded between ESMA and the Bank of England are not respected or do not allow for an effective assessment of the risk that UK CCPs pose to the Union or its Member States.

(15)

In light of the uncertainties surrounding the future relationship between the United Kingdom and the Union, as well as their potential impact on the financial stability of the Union and its Member States and on the integrity of the Single Market, this Decision should expire on 30 March 2020. The assessment contained in this Decision is therefore without prejudice to any future assessment of the legal and supervisory arrangements of the United Kingdom for CCPs and, as such, should not be relied upon beyond the purposes of this Decision.

(16)

This Decision should enter into force as a matter of urgency and should only apply from the day following that on which the Treaties cease to apply to and in the United Kingdom unless a withdrawal agreement concluded with the United Kingdom has entered into force by that date or the two-year period referred to in Article 50(3) of the Treaty on European Union has been extended.

(17)

The measures provided for in this Decision are in accordance with the opinion of the European Securities Committee,

(a)

a withdrawal agreement concluded with the United Kingdom of Great Britain and Northern Ireland in accordance with Article 50(2) of the Treaty on European Union has entered into force by that date;

(b)

a decision has been taken to extend the two year period referred to in Article 50(3) of the Treaty on European Union.